Question 1

Taco Bell produces both tacos and burritos because when it does so, Taco Bell experiences

Accepted Answer

Economies of scope refer to the cost advantages that a firm experiences due to producing multiple products together. In the case of Taco Bell, producing both tacos and burritos allows them to use common ingredients, such as ground beef, cheese, and tortillas, which helps them to lower their overall production costs. Therefore, the best choice in this case is A) economies of scope.

Question 2

When Fatz confectionery can lower the cost of manufacturing and packaging a pound of candy by doubling the quantity manufactured and packaged each day, it will achieve

Accepted Answer

The scenario describes a situation where Fatz can lower the cost of manufacturing and packaging candy by increasing the quantity produced and packaged daily. This suggests that Fatz can benefit from economies of scale, which are cost advantages gained from increased production and efficiency. Therefore, the best choice is B.

Question 3

Which of the following may yield economies of team production for Jitters Coffee Company, Inc.?

Accepted Answer

Dividing the process of packaging and shipping coffee into several specialized tasks, each performed by different people, can yield economies of team production as it allows for each person to specialize in a particular task, increasing efficiency and productivity. The other options may not necessarily lead to economies of team production.

Question 4

Joe's Pizza Shop only makes pizza. If each pizza requires five people, each of whom specializes in one task, this method of production is an example of

Accepted Answer

Team production is the method of organizing a firm's production process such that teams of specialized workers perform a specific task in the production process. In this case, Joe's Pizza Shop requires five specialized workers to produce each pizza, making it an example of team production. Economies of scope refer to the cost advantages that firms can achieve by producing a variety of products instead of just one, which is not applicable in this scenario. Economies of monitoring and coordination refer to the costs of managing and coordinating workers, which is not directly related to the method of production used by Joe's Pizza Shop.

Question 5

Economies of team production exist when the

Accepted Answer

Economies of team production arise from the division of labor and specialization of tasks among individual team members. As team members become more synchronized and efficiently coordinate their efforts, the overall productivity of the group increases, reducing the average cost of producing a unit of a good. Thus, choice D, where individuals in a group specialize in mutually supportive tasks in the production process, best describes the concept of economies of team production.

Question 6

Which of the following best defines "economies of scope"?

Accepted Answer

Economies of scope refer to the cost advantages a firm gains when it uses specialized resources to produce a range of goods. As the number of products produced increases, the cost of producing a unit decreases due to the sharing of these specialized resources. Therefore, option C is the most appropriate definition of economies of scope. Options A and B refer to economies of scale, where firms experience cost advantages as output increases. Option D is not related to either economies of scope or scale.

Question 7

Suppose Angelo Sessa, owner of Sezz Medi Brick Oven Pizza in NYC, earns $350,000 in revenue per year. He spends $800 a month on ash wood for his stove, $2000 a month on rent, and $1500 a month on ingredients. He used to be a lawyer and earned $240,000 a year before he opened up Sezz Medi. Normal profit for a pizza business is $30,000. If Angelo switches to oak wood to fire his stove and oak costs an extra $2500 each month, but this change causes his revenues to increase to $351,000. What is Angelo's opportunity cost of production?

Accepted Answer

The answer of Suppose Angelo Sessa, owner of Sezz Medi...

Question 8

A firm with a sales department, a production department, and a marketing department provides an example of

Accepted Answer

The answer of A firm with a sales department, a...

Question 9

Suppose Angelo Sessa, owner of Sezz Medi Brick Oven Pizza in NYC, earns $350,000 in revenue per year. He spends $800 a month on ash wood for his stove, $2000 a month on rent, and $1500 a month on ingredients. He used to be a lawyer and earned $240,000 a year before he opened up Sezz Medi. Normal profit for a pizza business is $30,000. What is Angelo's economic profit?

Accepted Answer

The answer of Suppose Angelo Sessa, owner of Sezz Medi...

Question 10

When Jitters Coffee Company, Inc., can lower the cost of packaging a pound of coffee by doubling the quantity packaged each day, it is achieving

Accepted Answer

Economies of scale refer to the cost advantages that a company can achieve by increasing production scale. In this scenario, Jitters Coffee Company is able to lower the cost of packaging a pound of coffee by doubling the quantity packaged each day, indicating that they are achieving economies of scale.

Question 11

Economies of scope are cost reductions achieved by

Accepted Answer

Economies of scope refer to the cost advantages that a company can achieve by producing multiple, related products. By doing so, the company can take advantage of shared resources, such as equipment, marketing campaigns, and distribution channels, which can reduce costs and improve efficiency. As a result, companies that have economies of scope can often achieve higher profit margins than those that focus on a single product or service.

Question 12

Suppose Angelo Sessa, owner of Sezz Medi Brick Oven Pizza in NYC, earns $350,000 in revenue per year. He spends $800 a month on ash wood for his stove, $2000 a month on rent, and $1500 a month on ingredients. He used to be a lawyer and earned $240,000 a year before he opened up Sezz Medi. Normal profit for a pizza business is $30,000. If Angelo switches to oak wood to fire his stove and oak costs an extra $2500 each month, but this change causes his revenues to increase to $351,000. What is Angelo's economic profit?

Accepted Answer

The answer of Suppose Angelo Sessa, owner of Sezz Medi...

Question 13

"When the cost of producing a unit of a good falls because the firm uses specialized resources to produce a range of goods and services" is the definition of

Accepted Answer

Economies of scope refers to the ability of a firm to produce multiple products using the same specialized resources, which results in a decrease in the average cost of production. So, when the cost of producing a unit of a good falls because the firm uses specialized resources to produce a range of goods and services, it is an example of economies of scope. Option B) economies of scale refers to the cost advantages gained due to the increase in the scale of production, option C) economic efficiency refers to the optimal use of resources to produce goods and services at the lowest cost, and option D) technological efficiency refers to the production of goods and services using the latest technology and techniques to reduce cost and maximize output.

Question 14

Suppose Angelo Sessa, owner of Sezz Medi Brick Oven Pizza in NYC, earns $350,000 in revenue per year. He spends $800 a month on ash wood for his stove, $2000 a month on rent, and $1500 a month on ingredients. He used to be a lawyer and earned $240,000 a year before he opened up Sezz Medi. Normal profit for a pizza business is $30,000. What is Angelo's opportunity cost of production?

Accepted Answer

To find the opportunity cost of production, we need to subtract all the explicit and implicit costs from the revenue.

Explicit costs:
- Ash wood per year: $800 x 12 = $9,600
- Rent per year: $2000 x 12 = $24,000
- Ingredients per year: $1500 x 12 = $18,000

Total explicit costs: $9,600 + $24,000 + $18,000 = $51,600

Implicit costs:
- Normal profit for a pizza business: $30,000
- Angelo's previous salary as a lawyer: $240,000

Total implicit costs: $30,000 + $240,000 = $270,000

Total costs (explicit + implicit): $51,600 + $270,000 = $321,600

Opportunity cost of production: $350,000 - $321,600 = $28,400

Therefore, the best choice is D, $321,600.

Question 15

U.S. auto sales took a beating in September 2008 as the nation's worsening economy turned dealer showrooms into ghost towns. Automakers reported a sharp drop-off in sales in the last ten days of the month as news of bank failures and a stock market meltdown increased economic uncertainty. What type of constraint do the automakers face when there is increased economic uncertainty?

Accepted Answer

Increased economic uncertainty leads to information constraint as consumers are less certain about their future income and spending, making them more hesitant to make large purchases like cars.

Question 16

A firm finds that it can produce several different goods at a lower average cost by using some of the same production facilities than it could if it produced each of the goods with separate production facilities. This firm is

Accepted Answer

The firm is gaining economies of scope as it can produce multiple goods with lower average costs by using the same production facilities. Economies of team production refer to the benefits of teamwork and collaboration in production processes, while economies of scale refer to the cost savings achieved by producing more units of a single good. Incurring diseconomies of scale would mean that the firm is experiencing higher average costs as it increases its production scale.

Question 17

Team production is a production process in which

Accepted Answer

In team production, individuals specialize in different but mutually supportive tasks. This allows for the efficient production of goods and services through collaboration and coordination between team members. Pay may or may not be based on group output, and there may or may not be competition with other groups performing identical tasks or rotation of individuals between different tasks.

Question 18

If a firm that repairs both motorcycles and cars is able to do so at a lower cost than a firm that does only one or the other, this would be an example of

Accepted Answer

Economies of scope occur when a firm is able to lower its costs by producing a wider variety of goods or services than it would be able to produce on its own. By offering repairs for both motorcycles and cars, the firm is able to spread its fixed costs over a larger range of services, thereby reducing its average cost per unit. This is different from economies of scale, which occur when a firm is able to lower its costs by producing more of the same product. Monitoring and increasing transaction costs are not relevant to this scenario.

Question 19

Economies of scope exist when

Accepted Answer

The answer of Economies of scope exist when
...

Question 20

Quick Auto Service will do oil changes. If each oil change is done by five people, each of whom specializes in one task, this is an example of

Accepted Answer

Team production involves dividing a task into specialized parts and assigning each part to a team member who is best suited for the task. In this case, each person specializes in one task of the oil change process, which is an example of team production.

Quiz 10: Organizing Production

Taco Bell produces both tacos and burritos because when it does so, Taco Bell experiences

When Fatz confectionery can lower the cost of manufacturing and packaging a pound of candy by doubling the quantity manufactured and packaged each day, it will achieve

Which of the following may yield economies of team production for Jitters Coffee Company, Inc.?

Joe's Pizza Shop only makes pizza. If each pizza requires five people, each of whom specializes in one task, this method of production is an example of

Economies of team production exist when the

Which of the following best defines "economies of scope"?

A firm with a sales department, a production department, and a marketing department provides an example of

When Jitters Coffee Company, Inc., can lower the cost of packaging a pound of coffee by doubling the quantity packaged each day, it is achieving

Economies of scope are cost reductions achieved by

"When the cost of producing a unit of a good falls because the firm uses specialized resources to produce a range of goods and services" is the definition of

A firm finds that it can produce several different goods at a lower average cost by using some of the same production facilities than it could if it produced each of the goods with separate production facilities. This firm is

Team production is a production process in which

If a firm that repairs both motorcycles and cars is able to do so at a lower cost than a firm that does only one or the other, this would be an example of

Economies of scope exist when

Quick Auto Service will do oil changes. If each oil change is done by five people, each of whom specializes in one task, this is an example of